Federal prosecutors in Manhattan filed the first criminal charge against a U.S. broker-dealer under a decades-old anti-money-laundering law, accusing a small Kansas firm of ignoring “red flags” about a shady payday lender.

Central States Capital Markets failed to file a suspicious-activity report related to former customer Scott Tucker, who’s serving a 16-year sentence for using Native American tribal entities to hide a massive payday-lending scheme, prosecutors in New York said Wednesday. The 1970 Bank Secrecy Act requires financial institutions to assist in detecting and preventing money laundering, such as reporting cash transactions above $10,000. A 1992 amendment required the suspicious-activity reports.

Central States, based in Prairie Village, Kansas, agreed to forfeit $400,000 and enhance its bank-secrecy and anti-money-laundering compliance program, prosecutors said. The suit stems from the company’s “willful failure” to alert authorities to Tucker’s behavior, even after the firm’s chief executive officer was tipped off to major elements of the scheme by Tucker himself.

Under the agreement, overseen by U.S. District Judge J. Paul Oetken, the case against Central States will be deferred for two years and then dismissed.

The 25-person firm failed to follow its own procedures for dealing with suspicious activities when it opened investment accounts for Native American tribal entities that Tucker was using to mask his illegal operation, the government said.

“CSCM’s anti-money-laundering program was operated with serious gaps in oversight, responsiveness and diligence,” U.S. Attorney Geoffrey Berman said in a statement. “As a result, CSCM failed to investigate and report suspicious transactions relating to a historically significant pay-day lending fraud.”

The company, in an emailed statement, said it was pleased to have resolved the case and that it “accepts full responsibility for the past deficiencies” in its anti-money-laundering program. The firm said it will hire a full-time chief compliance officer, step up training and hire a consultant to conduct annual reviews.

In October 2017, Tucker and his lawyer, Timothy Muir, were convicted after a trial in federal court in Manhattan for their roles in a “massive payday lending scheme” that targeted people across the U.S. with short-term, unsecured loans with interest rates as high as 700 percent, the U.S. said.

According to prosecutors, Tucker attempted to get around the numerous state usury laws he violated by entering into sham relationships with tribal entities to mask his control of the company and gain the protection of their tribal sovereign immunity. In 2012, he even alerted the chief executive officer of Central States of his plan for the tribal entities, but the company ignored the red flag, the U.S. said.

“Numerous suspicious transactions went undetected and unreported by CSCM,” the government said

https://theamla.com/wp-content/uploads/2018/12/red-flag.jpg800800Jon McGauleyhttps://theamla.com/wp-content/uploads/2017/02/amla-logo-web2017.jpgJon McGauley2018-12-20 10:33:332018-12-20 10:33:33Broker Is the First Charged Under Money-Laundering ‘Red Flag’ Law

According to prosecutors, the scheme would start with a person using a bad credit card to transfer funds into an inmate’s account.

Then the inmate would ask someone at the justice center to send the money in his account to a friend or family member, officials said.

Finally, investigators said an employee at the jail would write a check to someone on the outside.

The banks connected to the credit cards lost about $4,000 were lost throughout this process, officials said.

Hamilton County Sheriff’s Office spokesman Lt. David Daugherty said this case is the first of its kind for the county.

The case has been under investigation for about two years, he said, and it has resulted in changes to how money is processed from inside to outside the jail.

Before inmates could transfer up to $500 out of the jail at once, Daugherty said. Now, the amount is up to $250.

He said now there is more internal and external vetting and credit cards are checked for clearance before transactions are made. Inmates are also restricted to one transaction per month, Daugherty said.

One of the nine defendants is already being held at the Hamilton County Justice Center. Trials in the case have not yet been scheduled.

The UBS broker-dealer unit provided clients with what U.S. regulators called “banking-like services,” such as wire transfers, check writing and ATM withdrawals, but it didn’t structure its anti-money-laundering compliance program to address the potential use of its offerings for illicit-finance purposes, regulators said.

UBS is to pay $5 million to the Treasury Department, $5 million to the Securities and Exchange Commission and another $5 million to the Financial Industry Regulatory Authority, the industry-funded brokerage regulator.

The bank “is pleased to have resolved this matter, which addressed certain legacy anti-money-laundering program deficiencies,” a spokesman for UBS said.

The Office of the Comptroller of the Currency this year censured UBSover “systemic deficiencies” in anti-money-laundering systems at its branches in New York, Connecticut and Florida. The order didn’t carry monetary penalties.

FinCEN said Monday that UBS Financial Services had failed to provide sufficient resources to ensure day-to-day anti-money-laundering compliance. Inadequate staffing led to a backlog of alerts and decreased the broker-dealer’s ability to file timely suspicious-activity reports, FinCEN said.

UBS Financial Services, over a period of several years, processed through certain brokerage accounts hundreds of transactions that showed red flags associated with shell-company activity and failed to adequately monitor foreign-currency-denominated wire transfers worth tens of billions of dollars that were conducted through its commodities accounts and retail brokerage accounts, FinCEN said.

Shell companies are legally formed corporations, but they can also be used to mask the beneficial ownership of account assets and can make tracking funds more difficult for law enforcement and tax officials. FinCEN issued guidance in 2006 on the money-laundering risks of shell companies.

The broker-dealer’s monitoring system failed to capture critical information about the foreign-currency-denominated wire transfers, including sender and recipient information and the country of origin and destination, FinCEN said.

“Financial institutions must fully evaluate and identify the specific [anti-money-laundering] risks of the business and services they offer to their customers so they can proactively develop and implement an appropriate [anti-money-laundering] program to mitigate those risks,” FinCEN said.

The Finra fine includes $4.5 million against UBS Financial Services for failing to properly oversee billions of dollars in foreign-currency wire transfers and $500,000 against UBS Securities LLC for failing to reasonably monitor “penny stocks” transactions from January 2013 to June 2017.

The bank’s failure to monitor the transactions was discovered in 2012 and UBS failed to put in place a reasonable system until April 2017, Finra said.

The Illicit Art and Antiquities Trafficking Prevention Act (HR 5886), proposed in the US Congress in May, is now in limbo after the November mid-term elections. However, it could be reintroduced to the new Congress in January 2019, amid a recent rise in anti-money-laundering initiatives worldwide.

In the last month alone, German police raided Deutsche Bank’s headquarters in Frankfurt as part of an investigation into the lender’s association with criminals laundering money through offshore tax havens, stemming from information in the Panama Papers and Offshore Leaks documents. Last week, the UK parliament suddenly suspended the tier 1 (investor) visa category for new applications due to corruption fears, effective immediately. Known as the “golden visa”, the scheme provided fast-tracked settlement for people willing to invest millions in the UK but was criticised for providing the super-rich with an easy way to launder stolen wealth. New rules to be announced in 2019 will require applicants to provide comprehensive audits of their financial interests.

The initial introduction of HR 5886 in the US came on the heels of the European Parliament’s fifth Anti-Money-Laundering directive, adopted earlier this year, which applies to all businesses selling works of art with transactions of €10,000 or more, irrespective of the payment method. Similarly, HR 5886 would apply the Bank Secrecy Act (BSA) to the art and antiquities market in order to quash money laundering. Dealers would be required to report transactions exceeding $10,000.

The bill would also force those who sell at least $50,000 worth of goods in a year to submit their financial records to the US government. But whether money laundering is prevalent enough within the industry to justify the regulatory burden it could place on dealers has become a point of contention, with some in the trade questioning who the legislation ultimately benefits.

The challenge with regulating the art business, says Andrew Schoelkopf, the president of the Art Dealers Association of America (ADAA), is that “those who seek to regulate it have a poor understanding of how the business actually functions”. He argues that money laundering is “simply not something that’s pervasive” in the art market.

The United Nations Office on Drugs and Crime (UNODC) estimates laundered funds to account for 2%-5% of the global GDP ($800bn-$2tr) annually, but there is no clear data illustrating the scope of money laundering within the art market. Like many high-value assets, art can ostensibly be used to “wash” dirty money—that is, profits gained illegally, often via the sale of drugs or weapons but also through such activities as embezzlement, insider trading and illegal gambling. These assets can then be traded or used as collateral, effectively scrubbing the criminal stain from the ill-gotten cash.

The art industry is an attractive marketplace for such activity for two main reasons. First, it is growing at a rapid rate; the US is the world’s largest art market, valued at $26.6bn and accounting for 42% of the global total of $63.7bn in 2017. A study recently conducted by Deloitte predicts that art and collectible wealth held by ultra-high-net-worth individuals will grow from an estimated $1.62tr in 2016 to $2.7tr in 2026.

Second, the art market is notoriously inscrutable—the price of a work of art is more subjective, and therefore volatile, than that of many other commodities. James McAndrew, a former specialist at US Customs and the Department of Homeland Security (DHS) and a forensic specialist in international art trade at the New York-based law firm GDLSK, says it is for that same reason that money laundering is less of an issue in reality than it is in theory—art is highly illiquid and difficult to sell. When it comes to high-priced works of art, especially those sold through legitimate dealers and auction houses, it is even harder to fudge the funds. “It’s like buying a house. You want a clear title,” McAndrew says.

Within the last decade or more, there have only been a few instances in which works of art were used as an accessory to money laundering, including the high-profile case of Brazilian banker Edemar Cid Ferreira in 2005, who smuggled works of art out of the country to hide illegal profits. In March, as part of an FBI sting operation to bust a $50m international securities fraud and money laundering scheme, the London-based dealer Matthew Green was charged with being part of a plot to “clean-up” £6.7mthrough the sale of a Picasso. He is yet to plead.

The common trait of both cases is that money laundering through art was just a small part of a bigger criminal operation—there have been no convictions to date for pure money laundering in the art trade. “Increased AML [anti-money laundering] legislation for the art world just seems like an opportunistic measure for prosecutors in order to force guilty pleas for unrelated corruption-and-fraud type crimes,” says Peter Tompa, the director of the Global Heritage Alliance and of counsel at the Washington, DC-based law firm Bailey and Ehrenberg.

Yet when Congressman Luke Messer, a Republican from Indiana, introduced HR 5886 in the US House of Representatives in May, his chief stated aim was to counteract terrorist financing “and crack down on terrorist organisations like ISIS”. It represented the evolution of a bill that had died on the Senate floor in 2016—the Terrorism Art and Antiquity Revenue Prevention Act, which was specific to the sale of looted antiquities from countries such as Iraq and Syria.

“Money laundering is a very different issue for antiquities than it is for art at large,” Tompa says, adding that he agrees such legislation could help promote the repatriation of looted antiquities, though a recent US State Department-funded study found that the Islamic State (IS) probably made little more than $1m from the sale of such objects—a far cry from the previously stated estimate of anywhere from $4m to $7bn. There is little to no numeric evidence connecting US art sales with IS or other terrorist activities.

That has not dissuaded proponents of the bill. “It’s challenging to put a number to a trade that by its very nature is secretive,” says Deborah Lehr, the chairman and co-founder of the Antiquities Coalition, a private archaeological advocacy group with ties to Unesco, based in Washington, DC. For that reason alone, “this area clearly merits a closer evaluation by authorities”, she says. But opponents say it could put the art trade in a regulatory straitjacket; the ADAA’s Schoelkopf says: “Art dealers are unduly being swept up into the same ball of wax with a handful of sophisticated financial industry fraudsters who don’t abide by regulations like these anyway.”

Furthermore, the majority of US art purchases are by cheque, credit card or wire transfer, all of which pass through financial institutions already subject to the US Treasury’s Financial Crimes Enforcement Network’s (FinCEN) tracking and reporting requirements. “If you make the dealers take this kind of reporting on individually, they’re all going to make their own version of it. It’s not going to be consistent and that will cause more problems,” McAndrew says.

But John Byrne, the vice chairman of AML Rightsource, a professional services firm specialising in AML and BSA compliance, says the art world’s arguments against regulation “are neither compelling nor new”. He adds that, if the bill were enacted, dealers would have “ample opportunity to comment on any regulation so they could make the case on how different they are from traditional banks, so requirements could be tailored”.

Messer lost his bid for a Senate seat this year, so HR 5886 requires a new sponsor and, as such, will lapse at the end of December. But Tompa says the bill is likely to be re-introduced to the new Congress when it is back in session since it appears to still have some support from “certain AML contractors who presumably want to expand their compliance business”.

https://theamla.com/wp-content/uploads/2018/12/307_am_mc_moneylaundering12_ferreira_painting_purchased_hi.jpg650960Jon McGauleyhttps://theamla.com/wp-content/uploads/2017/02/amla-logo-web2017.jpgJon McGauley2018-12-12 09:31:322018-12-12 09:31:32US anti-money-laundering bill could reappear early next year

A Tampa woman is facing 20 years in federal prison after she pleaded guilty Monday to conspiracy to commit money laundering.

As part of a plea agreement with federal prosecutors, Brenda Dozier, 54, agreed to pay approximately $225,000 in restitution to the victims of the money laundering conspiracy and to a forfeiture money judgment in the same amount.

A sentencing date has not been set.

Dozier laundered money from July 2015 through at least November 2015 that had been extorted from residents by conspirators residing in the states and overseas, according to U.S. Attorney Maria Chapa Lopez.

Her India-based conspirators extorted money by impersonating IRS officers and misleading victims to believe that they owed money and would be arrested and fined if they didn’t immediately pay their alleged back taxes. As part of the conspiracy, Dozier opened bank accounts, which she used to receive the fraud proceeds, typically via interstate wire transfers, according to U.S. Middle District of Florida court records. Once Dozier had retrieved the funds, she provided the money to her co-conspirators. Dozier was paid for opening the accounts and conducting the transactions.

Three of her co-conspirators, Nishitkumar Patel, Hemalkumar Shah and Sharvil Patel, were charged on Oct. 11 in a related case with conspiracy to commit wire fraud and extortion, and with individual counts alleging wire fraud, extortion, money laundering and aggravated identity theft for their roles in the scheme.

Their trials are scheduled to begin in April 2019 in U.S. Middle District Court in Tampa.

The case was investigated by the Treasury Inspector General for Tax Administration, the IRS–Criminal Investigation, the Florida Department of Law Enforcement and the Tampa Police Department. It is being prosecuted by Assistant U.S. Attorney Rachel K. Jones.

WICHITA FALLS, TX (RNN Texoma) – Wichita County Sheriff Deputies say they have arrested three men after a traffic stop unveiled more than $75,000 in cash and “hundreds of names, credit card numbers, pin numbers and zip codes.”

According to a press release, a Highway Interdiction Deputy made a traffic stop on U.S. 287 near Electra at around 1:45 Monday afternoon.

The occupants consented to a search of the car.

During the search, the deputy discovered $75,215 cash, gift cards not under the names of the driver or passengers, and two flash drives containing names, credit card numbers and more.

The driver, 34 year old Osniel Ramirez along with two passengers have been arrested.

The Passengers have been identified as 25 year old Disney Avila and 27 year old Miguel Aguiler.

All three man face charges of Fraudulent Use/Possession of Identifying Information and Money Laundering.

Each remains in the Wichita County Jail on separate $25,000 bonds. All three men also have federal holds placed meaning they are unlikely to be released. Avila also has an Immigration’s and Customs Enforcement detainer.

All three men were under investigation by the Amarillo Police Department regarding a large number of identity theft cases that occurred in that city.

United States authorities have charged four men, including two former Mossack Fonseca employees, with money laundering and fraud, the Department of Justice announced today.

The charges are the first in the U.S. following the Panama Papers investigation, which was first published in 2016 by the International Consortium of Investigative Journalists, Süddeutsche Zeitung and more than 100 global media partners.

Ramses Owens and Dirk Brauer, two former senior employees of the Panama-headquartered law firm, were charged with a string of offenses “in connection with their alleged roles in a decades-long criminal scheme,” the DOJ said in a statement.

A statement from the DOJ alleges that the four men “defrauded the U.S. government through a large scale, intercontinental money laundering and wire fraud scheme.”

“These defendants went to extraordinary lengths to circumvent U.S. tax laws in order to maintain their wealth and the wealth of their clients,” said U.S. Attorney Geoffrey S. Berman.

“For decades, the defendants, employees and a client of global law firm Mossack Fonseca, allegedly shuffled millions of dollars through offshore accounts and created shell companies to hide fortunes.”

U.S. authorities partnered with enforcement agencies around the world to arrest Brauer in Paris, France, and Von Der Goltz in London, United Kingdom. Gaffey was arrested in Boston on Tuesday. Panamanian citizen Owens remains at large.

“These efforts reflect the commitment of U.S. law enforcement to follow that trail and apprehend these criminals regardless of where they are in the world.”

The men are presumed innocent until proven guilty.

According to the DOJ, Mossack Fonseca employees deliberately created bank accounts in tax havens to hinder enforcement investigations and advised U.S. taxpayers to secretly repatriate money. The names of the real owners of shell companies “generally did not appear” on offshore company paperwork.

The Panama Papers investigation was based on a trove of 11.5 million files from inside Mossack Fonseca that were leaked to reporters Bastian Obermayer and Frederik Obermaier at German newspaper Süddeutsche Zeitung, and shared with ICIJ. The investigation, done in collaboration with more than 370 reportersworking for 100 media outlets, exposed the offshore holdings of world political leaders, links to global scandals, and details of the hidden financial dealings of fraudsters, drug traffickers, billionaires, celebrities, sports stars and more.

German-born Von Der Goltz, who lived in the U.S. from 1984, allegedly evaded taxes through shell companies and offshore bank accounts.

“The charges announced today demonstrate our commitment to prosecute professionals who facilitate financial crime across international borders and the tax cheats who utilize their services,” said Assistant Attorney General Brian A. Benczkowski.

“This dude was excited to get there he was still wearing his hospital scrubs when we arrived,” he said of one of the men, an alleged john.

The six-day operation focused heavily on online and social media ads. Of the 103 arrests made, 54 were alleged prostitutes, 29 were alleged johns, 13 were alleged pimps and seven face drugs and other charges.

Among the most serious arrests is 27-year-old Anthony Camacho, accused of human trafficking.

That 17-year-old is said to be a runaway from Virginia. If convicted, Camacho, who has a violent past that includes attempted murder, will face up to 30 years in prison.

“Our victim of human trafficking referred to him as King…we threw a bunch of aces at King now he’s in the county jail,” Judd said.

Other notable arrests include Edwin Lopez of Kissimmee, who allegedly wanted to have sex with a 14-year-old girl, and William Welch, whom the sheriff says also planned on having sex with an underage teen girl. Welch remains at large; there is a warrant out for his arrest.

WATERLOO – A California woman has been sentenced to prison for running a money laundering operation as part of her husband’s drug ring that shipped meth into Iowa.

Judge Leonard Strand sentenced Janeth Amelia Pineda, 36, of Chula Vista, to three years in prison on Wednesday following a plea to one count of conspiracy to commit money laundering. She will be on supervised release for two years after she completes her prison sentence.

Her husband, Michael Pineda, 34, has pleaded guilty to money laundering and meth conspiracy charges and is awaiting sentencing.

Others indicted include Brandon Neil Harders, formerly of Waterloo; Samuel Arias, Michael Pineda’s stepfather; Robert Lewis of Janesville and Jeffery “Slim” Westberg, and authorities sought to seize Harders’ rural Gladbrook home as part of the investigation.

Janeth Pineda, instructed by her husband, opened accounts at Wells Fargo Bank that the Iowa meth customers would use to deposit drug money they owed the husband. The operation moved more than $370,000 worth of drug money in less than two years, according to prosecutors.

Court records state Michael Pineda traveled to Coralville in 2014 to deliver meth and met with Harders. After the meeting, police stopped Harders when he was traveling back to Waterloo and found about 3 pounds of meth.

In August 2018, Harders was sentenced to 11 years in prison following a plea, and Westberg was sentenced to seven years in October. A jury found Lewis guilty of meth charges conspiracy charges following a trial in August.

So, ever wonder how these cyberbaddies are turning ill-gotten money, too sketchy for use in the real world, into clean cryptocurrency?

Let’s take a quick look at how they do it, for science!

Mixing services split up Bitcoin, only to reassemble it

Bitcoin mixers (also known as “tumblers”) purportedly clean dirty cryptocurrency by bouncing it between various addresses, before recombining the full amount through a Bitcoin wallet hosted on the dark web.

They’re a little painstaking to use, and definitely not free (standard fees will range from 1-3 percent of the cryptocurrency to be mixed).

You’ll need one Bitcoin wallet hosted on the ‘clearnet,’ (a fancy word for the standard internet). Also, you should open two or more Bitcoin wallets that run exclusively on the dark web (there are a few of these wallets available, but be careful!).

And of course, some Bitcoin to mix.

To start, Bitcoin is sent from a clearnet wallet to one of the hidden Torwallets. These kinds of transactions are called ‘hops,’ and can be done multiple times across dark web Bitcoin addresses, adding a layer of obfuscation with every ‘hop’.

With it stored on a dark web wallet, it’s time to run it through a tumbler. There are many mixing services that claim to be reputable, and charge various fees depending on the level of anonymity requested by the user, but it’s not up to me to show you where they are.

The tumbler will automatically split the Bitcoin up across multiple transactions, sending it at randomized intervals to enough Tor-hosted Bitcoin addresses that the ability to link the transactions together in a meaningful way is removed.

Once the tumbling is complete, the Bitcoin supposedly ‘clean’ enough to deposit on a cryptocurrency exchange to be traded for other cryptocurrencies, or even fiat.

This is done by simply trading the Bitcoin a number of times across various markets. For example, a user can deposit onto an unregulated exchange, swapping it for various altcoins.

Each time a trader exchanges cryptocurrency for another, they are adding degrees of privacy similar to ‘hopping’ between wallet addresses. Although, how effective this is depends heavily on the exchange’s monitoring technology, so this might not be a totally airtight solution.

The user can then withdraw their cryptocurrency to an external cryptocurrency wallet via other anonymous exchange accounts they own. Depending on the exchange, they could convert it to allegedly ‘clean’ fiat, but fiat markets on unregulated exchanges are hard to come by, and often shortlived.

Still, a few months back, researchers found unregulated cryptocurrency exchanges receive an overwhelming majority of the internet’s dirty Bitcoin. Even worse, the exchanges in countries where there is little-to-no AML regulations actually receive 36-times more Bitcoin from money launderers than those with appropriate rules in place.

Researchers estimated that after Bitcoin has been cleaned on exchanges, 97 percent of it ends up in countries with extremely lax KYC/AML regulations.